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Govt asked not to put brakes on first-car scheme

Auto companies 'unable to deliver all vehicles by the end of the year'

After the Cabinet approved the First Car Buyer Programme in September 2010, there were expectations that it would boost auto sales by 500,000 vehicles the following year.

With as much as Bt100,000 being offered in excise tax rebates for first car buyers, the programme was expected to cost the government Bt30 billion in lost revenue.

Despite the flood crisis in late 2011, auto sales quickly recovered with a record 40,000 orders being placed at the Bangkok International Motor Show in April.

Nevertheless, automobile companies are asking that the programme be extended since they have yet to fully recover from the parts disruption caused by the flood.

Deputy Finance Minister Tanusak Lekuthai, who overlooks the Excise Department, said the ministry is willing to consider extending the programme.

"The original target was to have 500,000 applicants and Bt30 billion was to be returned, but the number is presently much lower than the target," he said.

Excise Department director-general Benja Louischaroen started the extension process. She told reporters that the department would propose to the Finance Ministry that it extend the First Car Buyer Programme by three more months from the original December 31 deadline.

First-time buyers who place orders for new vehicles within this year can have them delivered in March 2012, she said.

"The problem is that automobile companies are unable to deliver vehicles to first car buyers by the end of this year since the flood had hit auto production for several months," she said.

However, the extension is valid only for individuals who made purchases and cannot be transferred.

"There are presently only 40,000 applicants for the programme, which is very low since the vehicles have not been delivered," she said, adding that auto companies have reported that there are 400,000 eligible Thais who can participate in the programme.

Meanwhile, the Revenue Department announced that those who receive the excise duty rebate will not be required to pay income tax for the amount received.

FINANCE FIRM: PROGRAMME

is NOT TAKING OFF

Although the government has put in much effort in promoting the First Car Buyer Programme, there are signs that point towards problems.

According to a source from an auto finance company, things aren't going smoothly.

"After seven months of the programme being initiated, we have been informed that customers who use the First Car Buyer Programme are starting to miss their monthly payments. The reason is that they don't earn enough to pay regular monthly installments while others use their cars for some time and are not impressed and then want to change to another model. These are the signs that show the undulations in payments that are taking place," he said.

"As far as I know, every finance company is facing this problem, especially those that give out lots of loans such as Toyota Leasing, Thanachart Bank and Krungsri GE. They have all been facing the problem and must find measures in case the customer decides to abandon the vehicle," he said.

He added that if First Car Buyer applicants ditch their vehicles, it would create more problems for the system.

"If the finance company has to repossess the vehicle, there will be more difficulties since the Finance Ministry has a special regulation that vehicles purchased under the programme cannot be sold before five years are up.



WATCHING THE 'LOW-DOWN

LONG-INSTALLMENT' GROUP

Toyota Leasing assistant managing director Prayuth Jitrwatcharakomol said that in case the customer is unable to continue the monthly payments, it would be considered a normal market situation. However, finance companies must be stricter when approving loans for customers paying 10 per cent down and choosing installment plans of 60 months or more. They could be required to provide more documents than others, he said.

"I see it as risk management and we have measures in case the customer is unable to continue payments. It is not that we just dash in to repossess the vehicle and auction it, and then being unable to transfer ownership. Another problem is finance companies do not know which vehicles belong to the programme, as officials have not sent them any confirmation documents," he said.

Prayuth also said that in case the vehicle is repossessed, it has to be studied which documents or forms are required by the Excise Department so that it could ask the Land Transport Department to "unlock" the vehicle ownership.

"Then it can be auctioned and sold without any problem," he said.

Toyota Leasing, he added, is still waiting for a confirmation letter from the Excise Department.

LEASING ASSOCIATION MEETS

WITH EXCISE DEPARTMENT

Tisco Bank deputy managing director Chalit Silpsrikul said the Thailand Leasing Association has met with Excise Department assistant director-general Jumpol Rimsakorn to discuss regulations, procedures and

documents required for

repossession of vehicles under the programme.

Tisco has approximately 7,000 customers under the programme, in which about 75,000 people are participating. The value of excise tax rebates is expected to reach Bt14 billion.

Meanwhile, Siam Commercial Bank (SCB) senior vice president Narong Srijakarin said SCB has 25,000 customers under the programme (from September 2011 to April this year).

"These are genuine customers and we believe that auto sales in 2012 will be historic and break through the 1-million-vehicle mark," he said.

40,000 APPLICANTS FOR

EXCISE TAX REBATES

According to the Excise Department, 33,000 applications were received from September 16 last year to May 4 this year. They are for 22,000 passenger cars, 5,200 single-cab pickup trucks, 5,500 double-cab pickup trucks and other vehicles. The number is expected to rise to 40,000 by the end of June.

An Excise Department official said that the trend will grow stronger.

"From April 30 to May 4, as many as 4,500 applications were made. It's going to increase from now on. However, the vehicle registration process is still slow since the Land Transport Department has a shortage of licence plates (both red and white).

AUTO-MAKERS ENJOY GROWTH

Despite the lack of progress in the financing scenario, auto production in the country looks like it's on steroids, with auto-makers announcing ambitious production expansion plans.

Mitsubishi Motors (Thailand) marketing director Vikrant Amatayakul is of the opinion that the ownership and financing problems will not affect auto sales.

"This is a problem that the finance companies must resolve; as for auto companies, orders are still flowing in," he said.

Honda Automobile (Thailand) senior vice president Pitak Pruittisarikorn said the auto market has been expanding due to the economic growth as well as government promotions.

IS the 500,000-VEHICLE

TARGET REALISTIC?

Auto companies have been raising production and forecasts, starting with Toyota. Toyota Motor Thailand vice president Ninnart Chaithirapinyo pointed out that there is a favourable upward trend in Thailand's GDP, and this would help drive up the auto market.

"Toyota may adjust its targets once again, from the present 450,000-vehicle projection," he said.

Honda, which recently reopened its Ayutthaya plants, said it plans to produce 240,000 vehicles during the first year.

Commercial vehicle giant Isuzu said pickup truck sales will break the 500,000 mark this year; the company is targeting sales of 200,000.

Tripetch Isuzu Sales president Hiroshi Nakagawa said earlier this year that auto-makers would get back their full production capacity from the end of March and pickup truck sales would account for 50-60 per cent of total auto sales in the country.

Judging from the various factors, it is possible that the First Car Buyer Programme will get more than 500,000 applicants if the deadline is extended by three months as major auto-makers are now running at full capacity.

In the end, the question is whether the programme is worth the price that the Thai government is paying, or would it just end up as another populist policy that creates inequality in the market for brands that do not qualify.


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